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Quantifying contagion risk in funding markets : a model-based stress-testing approach
Anand, Kartik; Gauthier, Céline; Souissi, Moez - 2015
We propose a tractable, model-based stress-testing framework where the solvency risks, funding liquidity risks and market risks of banks are intertwined. We highlight how coordination failure between a bank's creditors and adverse selection in the secondary market for the bank's assets interact,...
Persistent link: https://www.econbiz.de/10011304764
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Interbank asset-liability networks with fire sale management
Feinstein, Zachary; Halaj, Grzegorz - 2020 - Last updated: September 28, 2020
Interconnectedness is an inherent feature of the modern financial system. While it contributes to efficiency of financial services, it also creates structural vulnerabilities: pernicious shock transmission and amplification impacting banks' capitalization. This has recently been seen during the...
Persistent link: https://www.econbiz.de/10012291202
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Decomposing large banks' systemic trading losses
Raykov, Radoslav - 2024 - Last updated: March 7, 2024
Do banks realize simultaneous trading losses because they invest in the same assets, or because different assets are subject to the same macro shocks? This paper decomposes the comovements of bank trading losses into two orthogonal channels: portfolio overlap and common shocks. While portfolio...
Persistent link: https://www.econbiz.de/10014512423
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Financial development and the volatility of income
Pinheiro, Tiago; Rivadeneyra, Francisco; Teignier, Marc - 2013
This paper presents a general equilibrium model with endogenous collateral constraints to study the relationship between financial development and business cycle fluctuations in a cross-section of economies with different sizes of their financial sector. The financial sector can amplify or...
Persistent link: https://www.econbiz.de/10009692604
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News-driven international credit cycles
Ozhan, G. Kemal - 2021 - Last updated: December 23, 2021
How does news about future economic fundamentals affect within-country and cross-country credit allocation? How … between 2000-2010, including the changes in the sectoral allocation of bank credit and movements in cross-country borrowing …
Persistent link: https://www.econbiz.de/10012793564
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Monetary policy, private debt and financial stability risks
Bauer, Gregory H.; Granziera, Eleonora - 2016
Can monetary policy be used to promote financial stability? We answer this question by estimating the impact of a monetary policy shock on private-sector leverage and the likelihood of a financial crisis. Impulse responses obtained from a panel VAR model of 18 advanced countries suggest that the...
Persistent link: https://www.econbiz.de/10011573161
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Lending standards, productivity and credit crunches
Swarbrick, Jonathan M. - 2019
fluctuations, in line with prominent roles played by the credit crunch and collapse of the asset-backed security market in the … riskiness of borrowers. By using loan approval probability as a screening device, banks ration credit following financial …
Persistent link: https://www.econbiz.de/10012034334
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Asset encumbrance, bank funding and financial fragility
Ahnert, Toni; Anand, Kartik; Gai, Prasanna; Chapman, James - 2016
How does asset encumbrance affect the fragility of intermediaries subject to rollover risk? We offer a model in which a bank issues covered bonds backed by a pool of assets that is bankruptcy remote and replenished following losses. Encumbering assets allows a bank to raise cheap secured debt...
Persistent link: https://www.econbiz.de/10011451099
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Testing for financial contagion with applications to the Canadian banking system
Li, Fuchun - 2009
The author proposes a new test for financial contagion based on a non-parametric measure of the cross-market correlation. The test does not depend on the assumption that the data are drawn from a given probability distribution; therefore, it allows for maximal flexibility in fitting into the...
Persistent link: https://www.econbiz.de/10003852845
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Money and costly credit
Dong, Mei - 2011
I study an economy in which money and credit coexist as means of payment and the settlement of credit requires money … effects of inflation. Whether a buyer uses money or credit depends on the fixed cost of credit and the inflation rate. In … particular, inflation not only makes money less valuable, but also makes credit more expensive because of delayed settlement …
Persistent link: https://www.econbiz.de/10008841789